AG: For-profit colleges waste billions in taxpayer money

LOUISVILLE, KY (WAVE) - A college degree. It's something parents want for their kids and employers want on a resume.

Now, a group of schools known as "for-profit colleges" have come under fire for lying to students to get them in the door then sending them into the working world with what some call a worthless degree in addition to tens of thousands of dollars in debt.

The Kentucky Attorney General calls it a huge issue and is fighting to get some of those students their money back.

There are 141 for profit colleges in Kentucky. Even critics will say there's a place for that type of school, a handful in Kentucky are now facing lawsuits, for deceiving students to cash in.

Graduation day was a proud day for Michelle Moffitt. Seven years later, she is unemployed and saddled with debt.

"Very overwhelming," Moffitt said of the challenges she now faces. "I don't know what to do."

Moffitt got a degree in computer applications technology from National College located on Dixie Highway - a school she chose because she is a hearing impaired, a single mom and she felt like she wasn't prepared for a traditional college program.

But Moffitt said the instruction she received at National College was anything but higher education.

"We just basically learned the same things we learned in high school," Moffitt said. "The classes had nothing to do with the technology world. It's supposed to be business classes to train you to work in those fields. And that's not what National was about."

What is National College about? According to the lawsuit filed by Attorney General Jack Conway, it's about making money.

The lawsuit accuses National College of deceiving students at its six Kentucky campuses, inflating job placement rates in an effort to recruit students and drive up enrolment. Something National College President Frank Longaker vehemently denies.

"And there is no way, in any way shape or form, we are attempting to mislead students at our college," Longaker said.

National is one of three for profit colleges in Kentucky the Attorney General is suing for violating the state's consumer protection act. Daymar College is accused of over charging for textbooks, misleading students about credit transfers and admitting students who didn't meet enrollment standards.

Daymar said it's in negotiations with the Attorney General's office to resolve the issues.

"Our ongoing focus is to continue providing a quality academic experience for students and help prepare them to assume careers in a number of fields," Daymar Colleges Group President Dan Inman said in a written statement.

Conway has also filed suit against Spencerian College. Like National, Spencerian is accused of advertising bogus job placement rates.

Spencerian Attorney Grover Potts said the difference between the placement rates advertised on the schools web site and those reported to Spencerian's accrediting agency was the result of continued student placement, and not an attempt to mislead perspective attendees.

"He (Conway) wants to prove that for profit colleges are ripping students off and that's not happening generally and its certainly not happening with respect to Spencerian," Potts said.

Conway said his three year fight to crack down on for profit colleges is not a witch hunt.

"If you're going take our tax dollars, in the form of federal student loans and grants, and state student loans and grants, and say that you're going to use them for education, by gosh you better use them for education," Conway said.

A two year investigation of the for profit college industry by a U.S. Senate committee on education found in 2009, for-profit schools spent more on aggressive marketing campaigns than on instruction; 96 percent of for-profit students took out federal loans to pay for school; and more than half left school without a degree.

They were also much more likely to default on their loans than traditional college students meaning taxpayers get left holding the bill.

Conway said that means billions of dollars in taxpayer money is being wasted.

"Without a doubt," Conway said.

All this, as the companies that own for profit schools raked in a whopping $3.6 billion in profits over that same time period.

"Greed is a big, big part of it," Conway said. "This is a big, big business."

Conway said the high dropout rates and poor career placement at for profit schools leaves some students paying off loans for the rest of their lives.

"I don't know how I'm going to be able to do it," Moffitt said.

She still owes $11,500 for her National College degree. She said her college experience has been the worst lesson of her life.

"Just makes me feel like less of a person," Moffitt said. "When you graduate from high school that high school diploma means something. This just, is like a piece of paper."

In September congress will begin debate on reauthorization of the Higher Education Act, the laws that govern all colleges and universities.

Some lawmakers have already proposed bills that would ban schools from spending federal money on advertising and limit the amount of federal student loan money colleges can collect.

Conway said he's currently in settlement talks with Daymar College that could result in some of those students loans being forgiven. It is still yet to be seen what's going to happen with the lawsuits against National, and Spencerian.

There's also a Kentucky Board of Proprietary Education student where students can file a complaint. To link to that complaint form, click here.